Date: July 8, 2013
G&G Associates (GGIS)
Why I’ll Never Buy US Real Estate Again
Ɛtɛ Sɛn (What’s Up) GGIS Subscribers,
Fifty-one five ... do I hear 52? Fifty-two, last chance. I have fifty-one five, going once. Fifty-one five, twice ... Sold! For fifty-one five. Next on the docket, case number ...
And with that, the auctioneer's voice faded in my head as my brain grappled with the notion of having just dropped $51,500 on a 1,740-square-foot, three-bedroom house that I'd never set foot in. It was December 2004 and I was living in Wichita Falls, TX, where I was living as an AF Instructor pilot & part-time Real Estate investor. At that time, the real estate industry in the US was in full-speed mode and there really wasn’t a better place to invest your money.
From my analysis and the valuation spreadsheets that I'd built, real estate in Texas seemed fat with potential, and in particular the real estate I saw coming up for auction at the local sheriff's department foreclosure sales. Grab the right property at the right price, and my spreadsheets showed that you could effectively mint money.
And I did. After remodeling and upgrading the dated interior, the house I bought generated a 38.5% gain on a holding period of just a few months. Then, I became aware of flipping properties without even having to do much of the repairs all. It was a matter of putting a distress seller and buyer together, and do a double closing at the title office in which I literally owned the property for 30 minutes walking away with anywhere from $10-35K per transaction.
As long-time readers know, I'm a contrarian investor always searching for growth at a reasonable price, no matter the asset. That foreclosed property represented such an opportunity, since I knew I was grabbing the house at a deeply undervalued price and at a time when I saw solid price growth happening in my local housing market. I later learned, in fact, that I had paid $500 less than the last buyer had paid 10 years earlier to buy that house on the open market.
These kinds of opportunities exist all over the place when you take the time to seek them out. For the past several years, I’ve told our G&G Investment Society (GGIS) portfolio subscribers of many such investments that the typical investor will never hear about on CNN or FOX or at least not until it’s too late. But, if you aren’t in the know, you truly are missing out and the old saying … “what you don’t know truly will hurt you.” In this case, it’s hurting your financial portfolio.
“Today … I see an equally opportunistic play today in rental real estate ... but not where you would expect.”
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